Krauss-Maffei to Sell Tanks to Qatar in $2.5 Billion Accord

Robert Wall and Richard Weiss

April 18, 2013, 5:58 AM EDT

Krauss-Maffei Wegmann GmbH & Co. KG, the German military vehicle maker, won a 1.89 billion euro ($2.47 billion) contract from Qatar to modernize the Middle East country’s fleet of tanks and self-propelled howitzers.

The deal covers the export of 62 Leopard 2 tanks and 24 PzH 2000 Howitzers, the closely held Munich-based arms maker said in a statement. The accord also includes training and other support, it said.

Middle East buyers have become increasingly important to sustaining sales for U.S. and European arms makers as home markets contract. Saudi Arabia is also exploring the purchase of Leopard 2 tanks, considered among the world’s most advanced battle vehicles.

The equipment being sold to Qatar will replace French and South African machinery, the German manufacturer said. Delivery of the vehicles, which are all new build, will unfold over several years, the company said by e-mail. KMW says its vehicles and weapon systems are used by armed forces of more than 30 nations worldwide.

The company has sold more than 3,000 Leopard 2 tanks, which can weigh as much as 63 metric tons. Its weapons system, including a 120mm smooth bore gun, is supplied by Dusseldorf, Germany-based Rheinmetall AG. The PzH 2000 howitzer is jointly produced by Rheinmetall’s defense unit and KMW, with Rheinmetall responsible for about half of total content.

Stock Gains

Rheinmetall rose as much as 1.43 euros, or 4.1 percent, to 36.68 euros, the most in two months, and traded at 36.62 euros at 11.09 a.m. in Frankfurt, valuing the company at 1.45 billion euros.

“For Rheinmetall, the share of the tanks order may well be more than 200 million euros, plus additional orders from shared production of the howitzers,´´ said Benjamin Glaeser, an analyst at Berenberg Bank in London. ‘‘Germany’s government approving an order to Qatar may mean additional orders may have a better chance of getting approval.’’

The German government has sanctioned the deal, KMW said. Germany’s Economic Ministry didn’t immediately return a phone call seeking comment.

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